Unclaimed property., the official text

An act to amend Section 1516 of the Code of Civil Procedure, relating to unclaimed property.

LEGISLATIVE COUNSEL'S DIGEST

Existing law, the Unclaimed Property Law, governs the disposition of unclaimed property, including the escheat of certain property to the state. Existing law provides that any intangible interest in a business association escheats to this state if (1) the interest in the association is owned by a person who for more than 3 years has neither claimed a dividend or other sum nor corresponded in writing with the association or otherwise indicated an interest, as specified, and (2) the association does not know the location of the owner.
This bill would apply the 2 conditions above to any security or other intangible interest in a business association. The bill would provide that a security or interest does not escheat if either (1) the business association issues to the owner a dividend or other distribution that is, at least once every 3 years, negotiated, redeemed, or automatically deposited in an owner’s account, as specified, or (2) the business association does not issue dividends or other distributions, or issues dividends that are automatically reinvested in the owner’s account, and the holder’s communication to the owner is not returned as undeliverable. The security or interest would escheat to the state, as specified, if the holder’s communication to the owner is returned as undeliverable. The security or interest would also escheat to the state if the business association or its agent issues a dividend or other distribution to the owner at least once per year, and over a 3-year period none of that dividend or other distribution is negotiated, redeemed, or automatically deposited in an owner’s account, except as specified. The bill would clarify that its provisions do not apply to a digital financial asset.

The people of the State of California do enact as follows:

SECTION 1.
Section 1516 of the Code of Civil Procedure is amended to read:
1516.
(a) Subject to Section 1510, any dividend, profit, distribution, interest, payment on principal, or other sum held or owing by a business association for or to its shareholder, certificate holder, member, bondholder, or other security holder, or a participating patron of a cooperative, who has not claimed it, or corresponded in writing with the business association concerning it, within three years after the date prescribed for payment or delivery, escheats to this state.
(b) (1) Subject to Section 1510, any security or other intangible interest in a business association, as evidenced by the stock records or membership records of the holder, escheats to this state if both of the following conditions are satisfied:
(A) The security or interest is owned by the person who for more than three years has neither claimed a dividend or other sum referred to in subdivision (a) nor corresponded in writing with the holder or otherwise indicated an interest in the security or interest as evidenced by a memorandum or other record on file with the holder.
(B) The holder does not know the location of the owner.
(2) The holder shall be deemed to know the location of the owner for purposes of paragraph (1) and the security or other intangible interest in a business association shall not escheat if either of the following conditions is satisfied:
(A) The business association or its agent issues dividends or other distributions to the owner and a dividend or other distribution is, at least once every three years, negotiated, redeemed, or automatically deposited in an owner’s account maintained by a third-party bank, financial institution, or other business association separate and apart from the business association that issued the dividend or other distribution.
(B) The business association does not issue dividends or other distributions, or the business association issues dividends or other distributions that are automatically reinvested in the owner’s account, and the holder communicates with the owner via first class mail at least annually and the most recent communication is not returned as undeliverable.
(3) If the holder’s most recent communication, as described in subparagraph (B) of paragraph (2), is returned as undeliverable, the location of the owner shall be deemed unknown and the security or other intangible interest shall escheat three years after the later of the following:
(A) The date of the owner’s most recent indication of interest in the security or interest.
(B) The date that the communication sent by the holder or the holder’s agent to the owner is returned as undeliverable, unless the owner responds to any notice sent pursuant to subdivision (d) or otherwise subsequently indicates an interest in the security or interest prior to the date the security or interest is required to be reported pursuant to Section 1530.
(4) If subparagraph (B) of paragraph (2) does not apply and the business association or its agent issues a dividend or other distribution to the owner at least once per year, and over a three-year period none of those dividends or other distributions are negotiated, redeemed, or automatically deposited in an owner’s account maintained by a third-party bank, financial institution, or other business association separate and apart from the business association that issued the dividend or other distribution, and the owner has not otherwise indicated an interest in the security or other intangible interest from which the divided or distribution is derived for such period, the location of the owner shall be deemed unknown and the security or interest shall escheat unless the owner responds to any notice sent pursuant to subdivision (d) or otherwise subsequently indicated an interest in the security or interest prior to the date the security or interest is required to be reported pursuant to Section 1530.
(c) Subject to Section 1510, any dividends or other distributions held for or owing to a person at the time the stock or other security to which they attach escheats to this state also escheat to this state as of the same time.
(d) If the holder has in its records an address for the apparent owner, which the holder’s records do not disclose to be inaccurate, with respect to any interest that may escheat pursuant to subdivision (b), if no further action is taken by the owner prior to the next reporting deadline specified by Section 1530, the holder shall make reasonable efforts to notify the owner by mail or, if the owner has consented to electronic notice, electronically, that the owner’s interest in the business association will escheat to the state. The notice shall be given not less than 6 nor more than 12 months before the time the interest in the business association becomes reportable to the Controller in accordance with this chapter. The face of the notice shall contain a heading at the top that reads as follows: “THE STATE OF CALIFORNIA REQUIRES US TO NOTIFY YOU THAT YOUR UNCLAIMED PROPERTY MAY BE TRANSFERRED TO THE STATE IF YOU DO NOT CONTACT US,” or substantially similar language. The notice required by this subdivision shall specify the time that the interest will escheat and the effects of escheat, including the necessity for filing a claim for the return of the interest. The notice required by this section shall, in boldface type or in a font a minimum of two points larger than the rest of the notice, exclusive of the heading, (1) specify that since the date of last activity, there has been no owner activity regarding the security; (2) identify the security by number or identifier, which need not exceed four digits; (3) indicate that the security is in danger of escheating to the state; and (4) specify that the Unclaimed Property Law requires the holder to transfer the security to the state if the owner has been inactive for three years and the holder does not know the location of the owner. It shall also include a form, as prescribed by the Controller, by which the owner may confirm the owner’s current address. In lieu of returning the form, the holder may provide a telephone number or other electronic means to enable the owner to contact the holder. The holder may impose a service charge on the owner for this notice and form in an amount not to exceed the administrative cost of mailing or electronically sending the notice and form, and in no case to exceed two dollars ($2).
(e) In addition to the notice required pursuant to subdivision (d), the holder may give additional notice as described in subdivision (d) at any time between the date of last activity by, or communication with, the owner and the date the holder transfers the deposit, shares, or other interest to the Controller.
(f) The interest that escheats pursuant to subdivision (b) shall not be reportable pursuant to Section 1530 unless and until the per share value, as set forth in Section 1172.80 of Title 2 of the California Code of Regulations, is equal to or greater than one cent ($0.01) or the aggregate value of the security held exceeds one thousand dollars ($1,000).
(g) (1) This section applies to all securities or other intangible interests in business associations, regardless of whether they are held by the owner directly, through a brokerage account, or otherwise.
(2) This section does not apply to a digital financial asset as defined in Section 3102 of the Financial Code.